USD to JPY: Yen Pair Reaches Six-Month High

As of early Tuesday in Europe, the USD to JPY pair is trading around 138.80, displaying modest gains. Within the chart patterns, the USD/JPY remains within a three-week-old ascending triangle, edging closer to the upper trendline. However, buyers may face a challenge from the overbought RSI (14) and the immediate resistance near 139.00.

Even if the USD to JPY pair manages to surpass the 139.00 hurdles, additional upside obstacles may arise at the November 30, 2022, peak around 139.90 and the psychological level of 140.00. The bears could find some defense at the September 2022 low of 140.35. Conversely, a pullback in the USD to JPY pair is unlikely unless it breaches the lower trendline of the ascending triangle, located near the 138.00 level.

In the event of a breakdown below the 138.00 support, the bears may face further challenges at the one-week-old horizontal support in the mid-135.00s and the 200-SMA level around 134.90.

Overbought RSI Presents Challenges for USD/JPY Buyers

It’s important to note that the bears would need confirmation from an upward-sloping support line originating from late March, which currently lies near 134.65, to regain control. Overall, while the USD/JPY is expected to remain firm, the path to the upside may be long and volatile. According to economist Lee Sue Ann and market strategist Quek Ser Leang at UOB Group, a potential breakthrough of the 139.00 barriers in the pair appears to be gaining momentum in the USD JPY forecast.

They emphasize that shorting this market seems unattractive due to the expected continuation of buying interest and the value opportunities present in this currency pair. During Monday’s trading session, the USD/JPY initially experienced a decline, reflecting the ongoing market volatility. However, it quickly reversed course and demonstrated strength, forming a hammer-like pattern by midday. In the event that the USD/JPY exceeds the previous session’s high, there is a possibility for the US Dollar to advance to higher levels, aiming for the ¥140 milestone and potentially encountering resistance around ¥142.50. It is worth noting the significance of the ¥138 level, which previously served as a resistance point within a significant triangle pattern.

Technical Analysis: Key Levels to Watch in USD/JPY Forecast

The breakout from the ascending triangle pattern has attracted considerable buyer interest in the Yen exchange rate. The Bank of Japan’s commitment to its yield curve control policy has led to the depreciation of the Japanese yen. Meanwhile, the Federal Reserve maintains a relatively tight monetary policy, providing an opportunity for the “carry trade,” where traders profit from holding long positions in the Dollars to Yen (USD/JPY) currency pair and earning daily interest payments.

In the event of a pullback, the 50-Day EMA at the ¥135 level could serve as a short-term support level for the Yen exchange rate. However, the prevailing sentiment favored the US Dollar against the Japanese yen in the USD JPY forecast. The potential for value opportunities that shortened the market does not appear attractive. Many participants are likely to engage in buying activities in the Yen exchange rate market.

Resilience Continues: Traders Capitalize on Value Opportunities

In summary, the USD/JPY pair has demonstrated strength in the face of the Japanese yen. It displayed a hammer-like pattern and recovered from an initial decline. A break above the highs of the previous session suggests the potential for continued upward movement. Additionally, the immediate targets are around ¥140, with a potential resistance at ¥142.50. The ¥138 level, which previously acted as resistance within a triangle formation, holds importance for the USD/JPY pair.

The breakout from the ascending triangle has attracted buying interest. Not surprisingly, the Bank of Japan’s yield curve control policy and the Federal Reserve’s tight monetary policy fuel the demand. Taking a short position in the dollar to yen market appears unappealing, given the anticipated continuation of buying interest and traders capitalizing on the value opportunities offered by this currency pair.

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